Oil giant Saudi Aramco has reported earning US$161 billion (NZ$262b) last year, claiming the highest-ever recorded annual profit by a publicly listed company and drawing immediate criticism from activists.
The monster profit by the firm, known formally as the Saudi Arabian Oil Co, came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and natural gas in Western markets.
Profits rose 46.5% when compared to the company’s 2021 results of US$110b (NZ$179b). It earned US$49b (NZ$80b) in 2020 when the world faced the worst of the coronavirus pandemic lockdown, travel disruptions and oil prices briefly going negative.
Aramco put its crude production at around 11.5 million barrels a day in 2022 and said it hoped to reach 13 million barrels a day by 2027. To boost that production, it plans to spend as much as US$55b (NZ$90b) this year on capital projects. Aramco also declared a dividend of US$19.5b (NZ$311.7b) for the fourth quarter of 2022, to be paid in the first quarter of this year.
Aramco hopes to increase its production to take advantage of market demand as China re-enters the global market after lifting its coronavirus restrictions. That could raise the billions needed to pay for Crown Prince Mohammed bin Salman’s plans to develop futuristic cityscapes to pivot Saudi Arabia away from oil.
However, those plans come despite growing international concerns over the burning of fossil fuels accelerating climate change. Meanwhile, higher energy prices already have strained relations between Riyadh and Washington, as well as driven up inflation worldwide.
“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real – including contributing to higher energy prices,” Saudi Aramco CEO and President Amin H. Nasser said in a statement.
Aramco’s results, viewed as a bellwether for the global energy market, mirror the huge profits seen at those of UK energy giant BP,America’s Exxon Mobil, Shell and others in 2022. But the sheer size of the US$161b (NZ$262b) profit overshadowed even its own previous results, as well as records by Apple, Vodafone and the US Federal National Mortgage Association, or Fannie Mae.
Benchmark Brent crude oil now trades around US$82 (NZ$133.40) a barrel, though prices had reached over US$120 (NZ$195) a barrel back in June. Aramco, whose fortunes hinge on global energy prices, announced a record US$42.4b (NZ$69b) profit in the third quarter of 2022 off the back of that price spike.
Those high prices have further strained ties between the kingdom and the United States, traditionally a security guarantor among the Gulf Arab states amid tensions with Iran. Before the midterm elections in November, the kingdom said the Biden administration sought to delay a decision by OPEC and allies including Russia to cut production that could have kept gasoline prices lower for voters – making public the typically behind-the-scenes negotiations common in the region.
President Joe Biden had warned the kingdom that “there’s going to be some consequences for what they’ve done” in terms of oil prices. However, those consequences have yet to be seen as Saudi Arabia and Iran went to China to strike a diplomatic deal Friday. US gasoline prices now stand on average at US$3.47 (NZ$5.65) a gallon, down just about a dollar from last year.
For the kingdom, higher crude oil prices can help fuel the dreams of Prince Mohammed, including his planned US$500b (NZ$813.6b) futuristic desert city project called Neom.
Those revenues also can go into Riyadh Air, a new airline announced Sunday by Prince Mohammed that will be under the kingdom’s Public Investment Fund and plans to fly to over 100 destinations by 2030. The Wall Street Journal, citing anonymous sources, reported Saudi Arabia may purchase up to US$35b (NZ$57b) worth of planes from Boeing Co.
However, they also run against the fears of activists over climate change, particularly as the United Nations’ COP28 climate talks will begin this November in the neighbouring United Arab Emirates.
Saudi Arabia has pledged to have net-zero carbon emissions by 2060, like China and Russia, though its plans to reach that goal remain unclear. Aramco’s earnings report noted it started a US$1.5b (NZ$2.4b) Sustainability Fund in October and plans a carbon-capture-and-storage facility as well.
Amnesty International’s secretary-general, Agnès Callamard, criticised Aramco’s annual profit coming amid global concerns about climate change.
“It is shocking for a company to make a profit of more than US$161b (NZ$262b) in a single year through the sale of fossil fuel – the single largest driver of the climate crisis,” she said in a statement.
“It is all the more shocking because this surplus was amassed during a global cost-of-living crisis and aided by the increase in energy prices resulting from Russia’s war of aggression against Ukraine.”
Callamard also noted that Saudi Arabia remains one of the world’s top executioners while also remaining locked in a years long war in Yemen and cracking down on dissent.
“These extraordinary profits, and any future income derived from Aramco, should not be deployed to finance human rights abuses, cover them up, or try and gloss over them,” she said.
Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every US$10 (NZ$16) rise in the price of a barrel of oil, Saudi Arabia stands to make an additional US$40b (NZ$65b) a year, according to the Institute of International Finance.
Shares in Aramco stood at US$8.74 (NZ$14.20) on Riyadh’s Tadawul stock exchange. That’s down from a high of US$11.55 (NZ$18.80) a share in the last year. However, that current price still gives Aramco a valuation of US$1.9 trillion (NZ$3.09t) – making it the world’s second most valuable company behind only Apple.
The Saudi government still owns the vast majority of the firm’s shares. Saudi Aramco publicly listed a sliver of its worth back in late 2019.
Aramco will release a comprehensive earnings report Monday.
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